The space must be used regularly and exclusively for business, and be your principal place of business. Exclusively is the word that disqualifies most claims — a desk in a spare room used for anything else does not meet it. Your CPA decides eligibility; your books supply the square footage and the expenses.
Two beliefs circulate about this deduction and both are wrong. One is that claiming it invites an audit. The other is that any laptop on any table qualifies. The truth is narrower than the second and less dramatic than the first.
The two conditions
Regular and exclusive use, and principal place of business. Regular is straightforward. Exclusive is where most claims fail — the space must not be used for anything else, and a room that doubles as a guest bedroom does not meet it.
Principal place of business is more forgiving than it sounds. If you conduct substantial administrative work there and have no other fixed location for it, that can qualify even where the work itself happens at client sites.
Two methods, and how to choose
The simplified method applies a flat rate per square foot up to a capped area. Almost no record-keeping, a predictable figure, and it avoids depreciation entirely.
The actual expense method allocates real home costs — rent or mortgage interest, utilities, insurance, repairs — by the business percentage of the space. More work, frequently a larger deduction, and it brings depreciation into the picture.
That last point matters at sale. Depreciation taken can be recaptured, which is a conversation to have before you choose the method rather than years later.
What your books should hold
Square footage of the office and of the home, recorded once. Then, if using the actual method, annual totals for the allocable expenses.
These are personal expenses being partially allocated to business, so they do not belong in the operating accounts during the year. Keep the source documents and let your CPA make the allocation at filing.
The audit worry
Claiming a legitimate home office is not a red flag. Claiming a large one against modest revenue, or claiming a space that plainly serves another purpose, is a weaker position — and that is a facts problem rather than a form problem.
If the space genuinely qualifies, claim it. If it does not, no method makes it qualify.
Employees cannot take it
The deduction is available to the self-employed and to owners of pass-through businesses. Employees, including someone who works remotely for a company they do not own, generally cannot claim it on a federal return under current rules.
A few states diverge from the federal treatment, which is worth asking about if you are an employee in a state with its own itemized deductions.
If you are an S corp owner
The route is different. Rather than deducting on a personal return, the usual structure is an accountable plan under which the company reimburses you for the home office expense, deducts the reimbursement, and the payment is not income to you.
That requires a written plan and substantiation. It is not complicated, and it is frequently missed by owners who made the S election and kept claiming as though nothing had changed.
Common questions
- Can I deduct a home office?
- If the space is used regularly and exclusively for business and is your principal place of business. Exclusive use is the condition most claims fail.
- What does exclusive use mean?
- The space is not used for anything else. A dining table you also eat at does not qualify; a room used only as an office does.
- What is the simplified method?
- A flat rate per square foot up to a cap, instead of allocating actual home expenses. Less record-keeping, and sometimes a smaller deduction.
- Does claiming it affect selling my home?
- It can, through depreciation recapture where the actual expense method was used. Raise it with your CPA before claiming rather than at sale.
- What records should I keep?
- Square footage of the space and of the home, and utility, insurance, mortgage interest or rent, and repair totals if using the actual method.
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